Central bank functions as a banker to the government - both central and state governments. It carries out all banking business of the government. Government keeps their cash balances in the current account with the central bank. Similarly, central bank accepts and makes payment on behalf of the government.

Also central bank carries out exchange, remittance, and other banking operations on behalf of the government. Central bank gives loans and advances to governments for temporary periods, as and when necessary and it also manages the public debt of the country. At the same time, central government can borrow any amount of money from RBI by selling its rupees and securities to the later. 

Net value added at factor cost (NDP_FC) = 560
Now,
GDPmp = NDP_FC +indirect tax + depreciation
Therefore GDP_Mp = 560+60+60=680
GDP_MP = sales + change in stock – intermediate cost
Or
sales = GDP_Mp  - change in stock + intermediate cost
 = sales  = 680 - (-30) + 1000 = 1710
Thus sales = 1710.

Computation of National Income:
National income or NNP_FC = Private final consumption expenditure + government final consumption expenditure – net imports +gross domestic capital formation – consumption of fixed assets – NIT + NFIA
= 900+400-30+250-20-100+(-40)
= Rs 1,360 crore
(Note: Here change in stock is not taken into account as it is a part of the gross Domestic Capital Formation)

A stock variable is measured at one specific time, and represents a quantity existing at that point in time which may have accumulated in the past. Whereas any variable whose magnitude is measured over a period of time is called a flow variable.
(i) Capital- Capital is a stock variable as it is measured at a particular point of time.
(ii) Saving- Saving is a flow variable as it is measured over a period of time. If it was savings, which is measured at one specific time, then it would have been considered as stock variable.
(iii) Gross Domestic Product: Gross Domestic Product is a flow variable as it is measured over a period of time.
(iv) Wealth: Wealth is a stock variable. Because, wealth is the abundance of valuable resources or valuable material possessions from the past and is measured at a particular point of time.

Computation of net national disposable income:
NNDP = NDP_FC + NIT - Net factor income to abroad – Net current transfers to the rest of the world

NDPFC = GDPMP - Consumption of fixed capital – NIT
=2000 -200 – 150 = 1,650
Now
NNDP = 1650+150-60-(-)200 = 1940
Hence net national disposable income = 1940

When the domestic currency appreciates, demand for imports by the native residents also increases. This is because appreciation of domestic currency implies depreciation of foreign currency. When domestic currency appreciates, imports become cheaper and there by the demand for import increases.
For example, a currency appreciation (fall in the exchange rate) from say, $1= Rs 40 to $1= Rs 38 implies that the goods from abroad become cheaper (that is, it now cost Rs 38 to purchase a commodity worth $1 instead of Rs 40 earlier). This would result in a rise in the demand for the imports.

The circular flow of income and expenditure refers to the process whereby the national income and expenditure of an economy flow in a circular manner continuously through time.
The various components of national income and expenditure such as saving, investment, taxation, government expenditure, exports, imports, etc. are shown in the form of currents and cross-currents in such a manner that national income equals national expenditure.

Assumptions of the Model:
The circular flow model in a two-sector economy is based on the following assumptions.

1. The economy consists of only two sectors namely, the households and the firms.

2. It is assumed that there is no government sector in the economy, so no taxes and transfer payments.

3. The economy considered is a closed economy i.e. it is assumed that there is no foreign sector. In other words, there is no external trade in the form of imports and exports.

4. The households spend the entire income received on the goods and services. In other words, it is assumed that there is no saving in the economy.

The above diagram depicts a two-sector circular flow model.
The inner arrow in the upper part of the diagram shows that the household sector provides factors services in the form of land, labour and capital to the firms. In return of the factor services provided, they receive factor payments from the firms in the form of rent, wages and interest (as shown by the upper most arrow). With the income received, households incur consumption expenditure on the goods and services provided to them by the firms (as shown by the lower most arrow).

With the help of this circular flow model, we can estimate the national income for the economy. National income can either be measured by aggregating the income of all the factors of production (inner arrow of the lower part) or by aggregating the expenditure incurred by all the sectors (upper most arrow).

Hence in two-sector model, we observe that the aggregate spending of the economy (consumption expenditure) equals the aggregate income earned by the factors of production (factor payments).

(1) Calculation of equilibrium level of national income:
Given, Consumption Function (C) =100+0.4Y
Investment expenditure (I) = 1,100
At equilibrium level AD= AS OR y= C+I 
By substituting values
Y=100+0.4Y + 1100
Y – 0.4Y = 1200
0.6Y=1200
OR Y =2000
Hence equilibrium level of national income = 2000

(2) Calculation of Consumption expenditure at equilibrium level of national income:
C= 100+0.4Y (Given)
Equilibrium level of national income = 2000
C= 100+0.4 *2000
C = 100+ 800
Therefore Consumption expenditure (C) at equilibrium level of national income (2000) = 900